Overview of Private Equity in Australia

Private Equity market in Australia has been growing rapidly, especially due to the demand of the small firms has been increased drastically. Even if Australian market is way too smaller than the US and UK market, still private equity in Australia has been creating great opportunities for new and small businesses.

Private Equity Market in Australia

Australian private equity market has always been grappling with issues that act as a hindrance in its growth. In 2016 as well, it was no different.

From plummeting the Australian dollars against the US dollars to political unrest, private equity market in Australia has faced immense challenges in the recent times.

Even few big shots like Dick Smith, Spotless and few other top firms which are backed by private equities have hit the skids in 2016.

Steve Byrom, Australia’s Future funds’ head of equity, analyses the whole private equity in Australia in the following manner. He says that the private equity market in Australia is about 10% of the whole fund, i.e. around Australian $11.5 billion (almost US $8.6 billion). And most of the private equity exposure comes from the US which is around 60%. The rest is split among Europe, UK and emerging markets of Australia.

To understand the private equity market, here are few statistics to look at –

It is being seen that 6% of Australian GDP goes to China.

During the year 2005 to 2015, around Australian $78.7 billion has been invested by Chinese as per the report of KPMG.

The weighted-average-return of private equity backed IPOs which are over Australian $100 million during 2013 to 2015 is 26.4%.

According to the Australian Private Equity & Venture Capital Association and Rothschild Australia, weighted-average-return of non-private equity backed IPOs during 2013 to 2015 is 8%.

Services Offered

In the Private Equity in Australia, the services offered by the private equity banks are slightly different than other private equity markets in the world. Let’s have a look at the services offered by the private equity in Australia –

Expansion services: Private equity in Australia help private companies to push the envelope and grow as much as possible. They assist in providing funds required to expand private businesses and offer them advisory so that they can mitigate risks along the way.

New product development: Australian private equity market is still an emerging market. And there is enough room for private companies to develop new products each and every year. But new product development needs a lot of research, building prototypes and a lot of trial and error and for that, a huge sum of money is required. Private equity banks in Australia has been instrumental to assist the private businesses to concentrate more on new product development and to create more value for their customers.

Mergers & Acquisitions (M&A): This is most common of all. In Australian market as well, private equity banks hugely invest into mergers & acquisitions and also provide advisory services so that the whole process becomes easier and swifter.

Funds for ownership/management change: A private business needs funds to run their operations smoothly. If there is any change in ownership or management, then the whole process needs funds to implement. Moreover, the private businesses also need to handle the effect which can be huge attrition rates or stock market downturn. Private equity in Australia help the private companies deal with the ownership/management change and any after effect whatsoever.

Top Private Equity Funds in Australia

Here are the top funds that are currently in the spotlight in Australian private equity market. The research report has been given by PEI Research & Analytics. And the data is mentioned as of the year 2016 and it has been ranked as per the target size of the funds.

Medical Research Future Fund: This fund is managed by Australia Future Fund. The sector of the fund is healthcare. And it has opened in the year 2015. The target size of this fund is Australian $14590.70 million.

Champ IV Fund: This fund is managed by CHAMP Private Equity. The sector of the fund is diversified. It has opened in the year 2015. The target size of this fund is Australian $1094.30 million.

Blue Sky Strategic Australian Agriculture Fund: The fund manager of this fund is Blue Sky Alternative Investments. The sector of the fund is agribusiness. And it has started in the year 2015. The target size of this fund is Australian $218.86 million.

Next Capital III: This fund is managed by Next Capital. The sector of the fund is diversified. It has opened in the year 2013. The target size of this fund is Australian $218.86 million.

Australia VC Fund III: The fund manager of this fund is Blue Sky Alternative Investments. The sector of the fund is technology, media & telecommunication. And it has started in the year 2015. The target size of this fund is Australian $218.86 million.

OneVentures Innovation Fund II: The fund manager of this fund is OneVentures. The sector of the fund is diversified. And it has started in the year 2014. The target size of this fund is Australian $100 million.

AirTree Ventures Fund II: This fund is managed by AirTree Ventures. The sector of the fund is technology, media & telecommunication. It has opened in the year 2016. The target size of this fund is Australian $72.95 million.

Reinventure Fund II: The fund manager of this fund is Reinventure Group. The sector of the fund is diversified. And it has started in the year 2016. The target size of this fund is Australian $72.95 million.

Digital Accelerator LP: This fund is managed by Adventure Capital. The sector of the fund is technology, media & telecommunication. It has opened in the year 2012. The target size of this fund is Australian $58.36 million.

MHC&C – Vivant Ventures Accelerator Fund: This fund is managed by M.H. Carnegie & Co. (MHC&C). The sector of the fund is technology, media & telecommunication. It has opened in the year 2013. The target size of this fund is Australian $58.36 million.

Private Equity Recruitment process in Australia

In private firms in Australia, the recruitment process is quite different. But what’s best about the recruitment of Australian private equity firms is the inclusion of all candidates. You can have a different ethnic or regional affinity, but you will only be judged by your merits and the eligibility criteria for the job. Your background will not decide your fate in the recruitment process.

Here’s a snapshot of the recruitment process of one of the top most private equity firms in Australia –

Online application: The first process is really simple. All you need to do is to apply online. You need to fill up an application form and submit your details. Then, the respective authorities will check out your application and based on your qualifications and experience, you will either be shortlisted for the next round or will be put through for future openings.

First round of interview: Depending on your location, you will be asked to come for interview mostly for one or two rounds. In the first round, you will be meeting with a partner and a senior associate from the HR committee. You will be having a friendly discussion and you will be assessed on the basis of your ability, type of work you did and area of expertise you have.

Second round of interview: The second round is often kept for the best candidates. Generally, this round will ultimately decide who will be offered the open position in the private equity firm. During the second round of interview, you will be meeting another partner of the firm and a solicitor from the recruitment department and you can ask any questions related to the job or company you might have.

Friendly meeting sessions: Usually, after the interview, you will be meeting firm’s other partners and associates to understand the organizational culture and how it is to work for the firm. And you will also be invited to the events of the firm so that you can get a feel for the organizational behavior and work standards. Although, this meeting is completely optional and it would not be considered in the process of recruitment.

Culture

In private equity in Australia, the organizational culture is the best part. Even though the private equity market has been going through few issues, still the organizational culture in most of the private equity firms have been instrumental to bring in the harmony between employees and to achieve organizational objective via coherence.

As all the partners are chosen after looking at their past track records, funds they managed before, the performance they have shown, again and again, usually, the result is quite satisfactory. Even after few struggles and many mishaps, that’s Australian private equity market has still been going strong as of 2016.

The outlook of every private equity in Australia is global and they look forward to becoming one of the top most private equity markets in the world.

Salaries

You may have cringed about the idea of going to Private Equity in Australia for a great job. Well, if you are one of the top candidates who have worked for few years in private equity market in Europe or US thinking that Australia has little or no chance of making it big in private equity, then maybe it’s time to reconsider your options.

Australia’s private equity market is quickly becoming robust and many top-notch private equity firms are taking interests in expanding their horizon to Australia. For example, JPMorgan Partners Asia has recently opened an office in Melbourne. US based private equity firm Carlyle Group has also opening a new Sydney office.

But what’s about the compensation? Are they looking up?

Have a look at the below chart which will help you understand where the compensation in private equity market stands in Australia as of now –

According to the above chart, it is clear that average private equity salary is Australian $154,000 or $79 per hour. If we do the math, this is almost 2.6 times more than the median wage in Australia.

If you are just starting out in private equity in Australia, you will make around Australian $108,000 per annum. And as you gain more experience, your compensation would increase gradually. And with more experience, you can even earn up to Australian $216,000 per annum.

Private Equity Exit Opportunities in Australia

Even if private equity in Australia has hit the skids in 2016 quite a few times, still the market looks strong and there is a lot of room for growth. Thus, exiting from private equity thinking that the dangers will loom large in near future may not be a good idea.

For example, if we look at the statistics, we would see that in the year 2015, there was almost 54% increase in the value of deals done by the private equity in Australia. And the value of the deals was around Australian $3.3 billion.

After all of it, if you still want to exit, there are opportunities as well for you. You can move to a hedge fund. Or you can consider becoming a venture capitalist. You can also join a portfolio company or join an advisory board.

But the idea is to stick to private equity, if you want to generate a big return in your career (both financially and on the basis of job-satisfaction).

In the final analysis

Australian private equity market is one of the strongest emerging private equity markets in the world. There is a plenty of scope for expansion and the keyword for aspirants who would like to start their career in private equity in Australian market is “aggressive patience”.

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This has been a guide to Private Equity in Austrlia, market overview, services offered, top private equity firms in Australia, its culture, salaries offered and exit opportunities. You may also have a look at these articles below to learn more about Private Equity